The cost of American higher education is reaching dizzying heights. Average tuition for attending a private, nonprofit four-year college or university in 2013 was $40,917 per year, while a public four-year college cost $18,391 yearly – figures representing a five-year increase of 14 percent and 20 percent, respectively. To pay the fattening bill, students are taking on more loan debt than ever before.

Blame bad public policy for much of this unaffordability. The federal student loan program, which disburses funds to students based on the price of attendance at their chosen college, provides no incentive for the schools to keep costs low – in fact, the incentive runs the other way, giving schools the confidence that they can spend lavishly on new dorms, fancy research labs and phalanxes of administrators, while passing the costs on to students. The program has clearly helped enable tuition to outpace inflation for decades. So far, Congress has done little to initiate reform.

The federal government's inaction, however, has created an opening for state-level policy innovators.

In Oregon, the legislature approved a plan – “Pay It Forward, Pay It Back” – that would make tuition free for resident students attending the state's public universities and community colleges. Michigan and Florida are considering comparable plans, and Washington state passed a bill authorizing its own Pay It Forward initiative this past March.

In Tennessee, Gov. Bill Haslam's Tennessee Promise would provide free tuition to Tennessee students who attend two years of a state community college or school of applied technology. All these plans have their good points, but none solve the problem of tuition growth.

For an effort that might truly disrupt traditional models of college instruction – and reduce college costs – look to Texas, where Gov. Rick Perry's most lasting higher-education legacy might lie in his recent campaign to get schools to lower costs.

In his 2011 state of the state address, Perry, calling for a “bold, Texas-style solution,” asked the state's public and private colleges and universities to design bachelor's degree programs with a total price tag of $10,000 or less, and suggested that college administrators “leverage web-based instruction, innovative teaching techniques and aggressive efficiency measures” to do so.

The challenge is optional – in the words of a senior Perry official, “it's not for every school.” Yet it has already spurred innovation. The University of Texas–Permian Basin, for example, has tried to meet Perry's challenge as well as increase interest in science, technology, engineering and mathematics fields. Students majoring in STEM who finish a certain number of courses and maintain a sufficient GPA each semester win a scholarship that brings down the bill for their four-year degree to less than $10,000. Texas A&M–San Antonio has created a cyber-security program that lets students with high school college credit and two years of community college complete their degree at the school, with a total cost of a little more than $10,000 (excluding books). Several other schools are offering similar options.

Another response to the governor's challenge is the Texas Affordable Baccalaureate Program, which could provide a new model for American higher ed. Through the program, students can get a bachelor's degree in applied science, with a focus on “organizational leadership,” mostly online. The program could be completed in three years, for a final tab of just $13,000 to $15,000, its designers say. TABP is currently offered through South Texas College and Texas A&M–Commerce. Students complete 90 lower-division credit hours by working through online “modules” that involve readings, video learning, scenario-based assignments and tutorials. Once they finish, they take 30 credit hours in upper-division courses on advanced business and managerial topics.

Perhaps the program's biggest innovation is that it awards credits for mastery of material, not time spent in the classroom. The “school year” is divided into six seven-week terms, and students pay a flat fee of $750 for each term that they're enrolled. Students can proceed at their own pace, giving them significant control over the cost of their degree – a novel notion for American higher education.

TABP thus far enrolls only 12 students, but the program's director anticipates 250 students signing up by the end of the year. Organizers hope to double enrollment every year, and they imagine that 3,000 to 5,000 students will be enrolling yearly within a half-decade. Perry's “bold, Texas-style solution” seems certain to spread to other states. Florida Gov. Rick Scott announced a $10,000 degree challenge in November 2012, and since then, all of Florida's bachelor's-granting public colleges have agreed to meet it. California legislators are reportedly looking into issuing a similar call.

Though some of the current state proposals don't address rising college costs directly, these efforts still represent alternatives to federal inertia. As is often true when federal policymakers drag their feet on problems that demand solutions, states are emerging as the laboratories of American democracy.